How Much Money Can Your XBox360 Live Arcade Game Make?

At the recent MicrosoftGamefest where GarageGames announced the new XNA game engine, Torque X, to complement Game Studio Express, Josh Williams, newly appointed CEO of GG, and myself gave a talk about Casual Game Smarts to a packed out room of game developers. Our discussion was about how to bridge the huge technology gap between downloadable games on the XBox and the PC. I have been, and will continue, going over many of the points in that presentation here in the MBG blog. A quick out take, and a part of the Indie game business that people are most interested in is “how much can my game make?”. I wrote about this subject in another MBG post called How Much Money Can Indie Games Make, Part 1.
I have to be careful in writing about this subject not to break any NDA’s, but since I gave this presentation at a Microsoft conference with MS people all around, and I am still here, I am assuming I’m going to be OK. All of the information that I am giving is currently public or has been in the public in some form.

Cost of Development

Creating an XBLA game is taking most studios 6-12 months. Costs are currently ranging from $100,000 to $300,000. As my MBG article, XBox360 Live Arcade Opportunities Get Competitive In A Hurry! about how fast the bar is raising for XBLA development pointed out, this will inflate rapidly. The industry standard arms race will quickly make the top end $300,000 budget a cheap product. Right now, I wouldn’t consider attempting to make an XBLA game with a $100,000 budget. Development kits and Certification (QA testing) would eat up half of that, not leaving much for the actual game development.

While these budgets may seem high to Indies, these budgets wouldn’t buy coffee on a AAA console title for the retail box channel.

I can’t give the exact figure, but the Marble Blast Ultra budget was at the higher end of the current budget range. I am happy that we took the time to get the game right.

Sales

Marble Blast Ultra has been reported on many sites to be one of the highest grossing XBLA titles. I believe this to be true. While Geometry Wars has sold a lot more units, it sells at half the price of MBU (400 vs. 800 Gamer Points, i.e. $5 vs. $10). Some of the recent games on XBLA are selling through the roof (Street Fighter), they have not been on the market long enough to pass MBU in sales.

A public domain way of ascertaining an approximate number of units MBU has sold is to sign up for an account and get a very low score on the game. That will put your player on the leader boards in the lowest position. You will see that there are 100-120,000 accounts ahead of you. Sure, there can be duplicates, etc., but this is the closest you will come to finding out how many units a game has sold. For educational purposes, we will use the number 120,000 units sold, knowing that we are close. For a more in-depth read about using this method to determine XBLA game sales, check out Doug Walsh’sRandomly Geneterated Blog article The Numbers Behind Live Arcade. (NOTE- Please read the comments below his article because he got some of the methodology wrong, but readers corrected the mistake.) Until we got real numbers for XBLA sales, we were using this method internally at GarageGames, and it was nice to see somebody else come up with this method and put it out in public, so I didn’t have to worry about NDA’s for this article.

So, 120,000 units * $10 per unit = $1.2MM. That is a nice number for an Indie, but that is not the whole story. Remember, Microsoft should make something for making this cool distribution channel available, and they do take a cut. The publicly available information on this is that the distribution fees for bringing a game to XBLA is 35-70% depending upon participation by MS, i.e. the publisher gets 30-65% of the money collected for game sales. This is very much in line with what the casual portals are charging, so I think it is safe to say the numbers are probably close. Let’s say you are a publisher or a developer that is able to fund your own development, so, a $10 game (800 Gamer Points) would net you $6.50, or 120,000 units * $6.50 per unit = $780,000.

Again, if you are a starving Indie developer this sounds like an infinite amount of money. But, in the world of publishers, this is not considered a big hit. Back in the day, when I was in charge of an entire studio for a publicly traded company, we looked to make a 5X return on our investment, so a game with $300,000 in development would be targeted to make at least $1.5MM, or it would not be considered a success. Remember, as the head of a studio you need to take a “venture capital” approach, so not every title will make it’s 5X ROI, and some will do better.

But, I no longer have public shareholders to please. As the co-founder of a small independent game technology provider that makes a few games, I am extremely happy with our returns from XBLA360, and I also know that we are not done yet. Marble Blast Ultra continues to sell extremely well, the conversion rates are astronomical, and MS continues to sell XB360’s at an accelerating rate. We may yet hit the old 5X return that I used to be held to!

Like I explained in my earlier article about the bar raising in the XBLA360 arena, slot approvals are getting hard to get. In fact, I liken XBLA360 slots to the “Golden Ticket” in Willy Wonka. If you get one, you are set!

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It is definitely going to be the number of available slots that limits the XBLA arena for indies. I wouldnt be surprised to see EA buy out as many of the remaining slots.. or see other publishers paying for same.

As you point out Jeff, its the expected lifetime of the products thats likely to generate the 5x revenue (which is interesting, never heard of that 5x thing but it makes sense).

How in the hell do you GUARANTEE a 5x earnings rate at a media based company thats based on public taste and opinion? Man thats a hard task

So the big question to you Jeff, do you STILL think that XBLA is a viable market for smaller indies? Personally, if your budgets are anything to go by from your blog entry, I’d say not any more. 300k is not your small indie devs budget for a title.

Thats not to say there arent companies out there who couldnt do it, but I wonder what percentage of indies is anywhere near that level.

From the things I’ve heard, not so many.

http://www.garagegames.com Jeff Tunnell

I didn’t think XBLA360 channel was viable for indies as soon as I wrote the XBLA Channel Gets Competitive In A Hurry article several months ago. I think it is a possibility, but only for the very best. Like I explained in that article, if you are a smaller Indie your only hope is to self fund a killer demo that can get attention of people that have slots.

While I speculated the buying out of slots in my “competitive” article, I have been assured that MS will not allow EA or Vivendi or any of the larger companies to buy out all of the slots on XBLA360.

The bottom line still remains. Make great games and they will find their market. The best thing about the XBLA360 channel (and others soon to come from the other console guys) is that once you get a great game going there will be mechanisms to get it into other channels besides PC download.

Isn’t this essentially a big turnaround from one of your key points in championing XNA? If you’re now claiming that XBL is effectively too rich for Indie blood, then why tie ourselves to MS to the exclusion of the Mac/Linux marketplace?

http://NOne.com Unknown Guy Or Girl

APPARENTLY THE IMAGE PICTURED ON MY FOREHEAD WAS THAT XLA WAS CREATED FOR SMALL DEVELOPERS. BUT ANY WHO WHY WOULD ANY ONE CONSIDER THEMSELFS A DEVELOPMENT HOUSE THAT CANT COME UP WITH A FEASIBLE 300,000 BUDGET. THIS BASICALLY FILTERS OUT WANNABES THAT WOULD MOSTLY CREATE UNWANTED GAMES THAT PROBABLY WOULD NOT EVEN GET CERTIFIED.

THERE IS AN OBVIOUS SYSTEM IN PLACE THAT DOES ENCOURAGE DEVELOPERS WITH A SERIOUS PLAN. WHILE FILTERING OUT UNWANTED DEVELOPMENT THAT WOULD BE DAMAGING TO MICROSOFTS SYSTEM.

WE ALL WANT A HOUSE BE NOT EVERYONE CAN AFFORD ONE.

juice

If I’m reading your article right, you essentially spent $300’000 and got back $780’000, for a net income of $480’000. Given that you’ll then have to reserve $300’000 for the next game, your company essentially got $180’000 for a years work. I’ve no idea what taxes and overheads would also have to be factored in, but that ain’t sounding like a lot…

I’m also wondering if the numbers at the minute may be somewhat skewed by the low number of available games and the lack of any competition from Sony or Nintendo. Nintendo may be especially dangerous, if the Wii catches on and NES/SNES/Genesis/etc downloads take off.

Even if Microsoft are limiting the number of available slots, the number of games is going to steadily increase, which means that there’s going to be more competition in the marketplace. This then translates into reduced revenues for games, notwithstanding the occasional killer app like Geometry Wars and cash-cows like Street Fighter II.

I’m hoping that I’m missing something here: XBL is not sounding like a land of milk and cookies, even if you have a golden ticket!

Jeff you stated this in one of your comments: “Like I explained in that article, if you are a smaller Indie your only hope is to self fund a killer demo that can get attention of people that have slots.”

Can you explain that, how are these slots doled out? Is it lottery. It seems like you are saying some companies may have a surplus of them… i guess i’m slightly confused but very interested….

The $180,000 is the profit from development of the game, after paying back the cost of one year’s worth of work ($300,000) and paying forward the cost for the next game ($300,000), according to the plan you laid out.

Not only that, but if you assume the same numbers and plan for game #2, then for the sake of discussion: the profit for #2 will be $480,000 ($300k paid forward for game 3, none to pay back for game 2, because game 1 already paid for game 2).

Regards,
Ken

http://www.johnpearsons.com JohnPearson

Nice Post.

That was well said. Always appreciate your indepth views. Keep up the great work!

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The problem comes where there are a few blockbuster games that take all the harcore dollars and the rest of the publishers that try for this audience make little profit. This strategy is not viable when the development costs of games are in the millions.

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The problem comes where there are a few blockbuster games that take all the harcore dollars and the rest of the publishers that try for this audience make little profit. This strategy is not viable when the development costs of games are in the millions.

Diane G Burrell

this is an awsome blog

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Xbox, playstation, WII, whats next? Some virtual AI? Cant wait, but i know it will make big cash.

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This was technical but enjoy it

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You will see that there are 100-120,000 accounts ahead of you. Sure, there can be duplicates, etc., but this is the closest you will come to finding out how many units a game has sold.

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I'm afraid that games for consoles are the future, since PC gaming is not going anywhere fast. A lot of console gamers are casual gamers, who like simple yet intelligent games.

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I never knew it costs that much money to develop a game, wow that's enormous amounst of cash. Do investors actually see gaming a a lucrative business?

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I bought my xbox in UK ebay and paid for it 100 pounds, I sold it in lithuania for 150 pounds, so 50 pounds.